WEBVTT - 5 things you need to know about China’s 20th National Congress 0:00:05.710 --> 0:00:08.660 we're talking about the five things you need to know about. 0:00:08.660 --> 0:00:12.240 One of the most watched events on the chinese political calendar. 0:00:12.250 --> 0:00:15.830 China's National congress is held every five years and it's 0:00:15.830 --> 0:00:18.950 coming up mid october. I'm sonar a mess from the 0:00:18.950 --> 0:00:22.730 money mine team. My guests victor Shiff, associate professor of 0:00:22.730 --> 0:00:26.530 political science at the University of California san Diego 0:00:26.870 --> 0:00:30.980 and Rory Green, head of china and Asia Research at T. S. Lombard. 0:00:30.990 --> 0:00:35.550 That's a macroeconomic forecasting consultancy victor. Let's start off with, 0:00:35.560 --> 0:00:38.699 why is this year's meeting so important And what clues 0:00:38.700 --> 0:00:40.430 should investors be looking out for 0:00:40.440 --> 0:00:46.409 Once every five years? The party congressional delegates who are 0:00:46.420 --> 0:00:52.000 2200 of the most senior officials in China will convene 0:00:52.000 --> 0:00:52.120 to 0:00:52.774 --> 0:00:58.074 and they elect a new slate of central committee members. 0:00:58.084 --> 0:01:00.304 And the Central committee is a little bit like the 0:01:00.304 --> 0:01:04.344 Congress of the Parliament. These are 200 of the most 0:01:04.354 --> 0:01:08.634 senior officials in china. But then the Central committee in 0:01:08.634 --> 0:01:13.624 turn will immediately elect the new politburo, the new politburo 0:01:13.624 --> 0:01:17.474 standing committee as well as elect or re elect 0:01:17.498 --> 0:01:21.038 in this case, the new secretary general of the Chinese 0:01:21.038 --> 0:01:25.967 Communist Party, the most important officials in the Chinese Communist Party. 0:01:25.978 --> 0:01:30.238 Therefore the most important officials in china will be elected 0:01:30.248 --> 0:01:34.428 or is selected. Some would say at this Congress and 0:01:34.428 --> 0:01:37.607 also a new set of agendas for the next five 0:01:37.608 --> 0:01:41.118 years will be announced in the political work report, which 0:01:41.118 --> 0:01:42.697 will be read out loud. 0:01:43.162 --> 0:01:45.162 She Jinping himself. 0:01:45.172 --> 0:01:48.882 Yes, a lot of important signals, particularly around the economy 0:01:48.882 --> 0:01:52.292 that will come out at the 20th party Congress. More 0:01:52.292 --> 0:01:56.202 important for the longer term. Less. So the short term. 0:01:56.212 --> 0:01:59.542 And really, I think there's going to be strong signals 0:01:59.552 --> 0:02:02.972 from the party Congress around changes to the constitution. Party 0:02:02.972 --> 0:02:08.102 Congress work report and the personnel governing the economy particularly 0:02:08.126 --> 0:02:11.606 And all these shifts will basically confirm the sides. We've 0:02:11.606 --> 0:02:16.516 seen that common prosperity more status. Government intervention is going 0:02:16.516 --> 0:02:20.486 to be the key for China's emerging growth model, particularly 0:02:20.486 --> 0:02:24.726 around the personnel, li Keqiang, the premier lieu, the top 0:02:24.736 --> 0:02:28.326 guy on the economy in china, both likely to step down. 0:02:28.326 --> 0:02:31.905 So it is a real key change here around the 0:02:31.916 --> 0:02:33.440 party constitution, 0:02:33.630 --> 0:02:36.800 the political economic framework and the people that are actually 0:02:36.800 --> 0:02:40.620 implementing these policies. It could be a very big shift here. 0:02:41.010 --> 0:02:45.530 The main change in the party constitution is to, we think, 0:02:45.530 --> 0:02:48.860 to have xi Jinping thought added to the constitution and 0:02:48.860 --> 0:02:51.889 this would elevate she to the same level as Mao 0:02:51.889 --> 0:02:55.360 Zedong and the only other party leader to ever have 0:02:55.360 --> 0:02:59.320 that accolade and really move into almost an unassailable position. 0:02:59.320 --> 0:03:03.280 He's already in an incredibly strong, powerful position. But this 0:03:03.290 --> 0:03:06.750 putting him level with Mao in his own lifetime, would 0:03:06.760 --> 0:03:10.040 be an extremely powerful move guarantee his 0:03:10.050 --> 0:03:16.290 continued leadership and through that flows his continued input into 0:03:16.300 --> 0:03:18.760 political economy and china's growth model. 0:03:18.770 --> 0:03:19.410 Do you 0:03:19.410 --> 0:03:22.210 think the Congress will be an inflection point if you 0:03:22.210 --> 0:03:22.520 will 0:03:22.520 --> 0:03:23.300 for key 0:03:23.300 --> 0:03:26.350 policies in china in particular for Covid zero 0:03:26.360 --> 0:03:29.299 until early this year. There has not been a lot 0:03:29.300 --> 0:03:34.419 of economic pain in china. So china control Covid pretty successfully. 0:03:34.419 --> 0:03:37.760 In 2020 2021 when the whole world had to speak 0:03:37.770 --> 0:03:39.090 covid pandemic. 0:03:39.280 --> 0:03:42.770 So the service sector did fairly well. But more importantly 0:03:42.770 --> 0:03:49.700 in 2020, Chinese exports grew tremendously because Chinese factories were 0:03:49.700 --> 0:03:53.040 still open and operating at a time when many factories 0:03:53.040 --> 0:03:56.620 around the world were shut down. So China became a 0:03:56.620 --> 0:04:02.310 main exporter of PPE. S, but also consumer electronics, clothing, etc. 0:04:02.510 --> 0:04:07.270 This year, the economic challenges is greater. But because export 0:04:07.270 --> 0:04:10.720 is still doing very well, the leadership may feel that 0:04:10.720 --> 0:04:15.580 it can continue with pretty stringent zero covid policies and 0:04:15.580 --> 0:04:20.470 not suffer too much economic repercussions. But of course if 0:04:20.480 --> 0:04:25.620 export were to worsen a lot more from today's level, 0:04:25.630 --> 0:04:27.940 they may have to reassess their approach. 0:04:27.956 --> 0:04:32.635 I think there are two. He breaks on removing zero 0:04:32.636 --> 0:04:35.726 covid policy in china. The first is political and the 0:04:35.726 --> 0:04:39.746 second healthcare. So after the Congress that does make it 0:04:39.746 --> 0:04:42.676 easy on the political side, I think we will start 0:04:42.676 --> 0:04:46.726 to see the propaganda and the state media messaging around 0:04:46.726 --> 0:04:49.966 zero Covid start to change and become a little bit softer. 0:04:49.976 --> 0:04:53.195 But the health care is the main barrier, the vaccination 0:04:53.196 --> 0:04:53.390 rate 0:04:53.402 --> 0:04:56.612 needs to come up much higher. This china CDC says 0:04:56.622 --> 0:04:59.241 they need to get through a very difficult winter flu 0:04:59.242 --> 0:05:03.822 season stocking up on medical equipment and supplies for us. 0:05:03.822 --> 0:05:06.962 We think it takes until Q 2 2023 Q two 0:05:06.962 --> 0:05:10.772 of next year for a more substantial easing of covid 0:05:10.772 --> 0:05:13.622 19 policies and once the party congress is out of 0:05:13.622 --> 0:05:16.422 the way, it'll be health care rather than politics, which 0:05:16.422 --> 0:05:18.842 is the main block on opening up. 0:05:19.089 --> 0:05:21.150 There are a couple of headwinds that we perhaps we 0:05:21.150 --> 0:05:25.240 get onto. We call them the three Ds debt, demographics 0:05:25.240 --> 0:05:29.960 and de globalization and longer term these three structural headwinds 0:05:29.960 --> 0:05:32.550 will weigh on china's growth. But near time it's all 0:05:32.550 --> 0:05:33.380 about Covid 0:05:33.660 --> 0:05:34.100 looking 0:05:34.100 --> 0:05:37.010 further ahead the first of those deeds, you talked about 0:05:37.010 --> 0:05:37.930 debt. Do 0:05:37.930 --> 0:05:40.050 We have any clues on how the country might tackle 0:05:40.050 --> 0:05:44.330 the property crisis? It's a massive risk. It's 70% of 0:05:44.330 --> 0:05:49.370 household wealth, key source of revenue for local governments. Banks, 0:05:49.385 --> 0:05:53.345 collateral banks, assets are heavily weighted to property. So it 0:05:53.345 --> 0:05:58.705 is a major risk. A global financial crisis. Lehman moment 0:05:58.714 --> 0:06:02.575 is always very unlikely in china because the government controls 0:06:02.575 --> 0:06:07.045 the banks, controls most of the Corporates and with capital controls, 0:06:07.055 --> 0:06:09.895 keeps all the household savings in the economy so money 0:06:09.895 --> 0:06:12.755 can be shifted around. But to actually get things around 0:06:12.755 --> 0:06:16.425 to generate growth, we really need to see improvement in confidence, 0:06:16.425 --> 0:06:18.485 particularly around presales 0:06:18.830 --> 0:06:22.950 pre sales of this. This model where an uncompleted apartment 0:06:22.950 --> 0:06:26.440 can be sold for full value and that's the dominant 0:06:26.440 --> 0:06:29.640 sales model in china and it worked very well when 0:06:29.640 --> 0:06:33.479 prices were rising and developers could sell more of these 0:06:33.490 --> 0:06:36.350 to use the money to complete the older pre sold units, 0:06:36.350 --> 0:06:38.599 but now prices are falling and no one trusts the 0:06:38.600 --> 0:06:40.870 developers and the model is breaking down 0:06:41.140 --> 0:06:43.400 and the only way you can restore that model is 0:06:43.410 --> 0:06:47.010 greater confidence in the economy and the developers to deliver 0:06:47.010 --> 0:06:50.360 these units. So Beijing could do a lot around this issue, 0:06:50.370 --> 0:06:53.040 It would need quite a bit of liquidity injected into 0:06:53.040 --> 0:06:57.080 these developers the banks, but the money is certainly that 0:06:57.089 --> 0:07:00.060 it's certainly doable. And it's a choice from Beijing that 0:07:00.060 --> 0:07:02.110 they don't want to Baxter 0:07:02.214 --> 0:07:06.415 The entire sector. They don't want to let moral hazard 0:07:06.425 --> 0:07:09.885 creep back in and give the developers a free ride. 0:07:09.885 --> 0:07:13.205 So they're trying to do enough to keep the sector alive, 0:07:13.215 --> 0:07:17.175 but not too much to kick off another round of speculation, 0:07:17.225 --> 0:07:18.925 but I think they will have to do more to 0:07:18.925 --> 0:07:23.185 keep the sector going until they can remove the COVID-19 restrictions. 0:07:23.850 --> 0:07:26.210 The real estate sector, some would say has been in 0:07:26.210 --> 0:07:30.030 a bubble territory for the past 10 years. Uh And 0:07:30.030 --> 0:07:33.510 I sort of feel that myself, but nonetheless, you know, 0:07:33.510 --> 0:07:36.500 the real estate sector kept growing, kept being able to 0:07:36.500 --> 0:07:39.810 refinance a lot of the debt from the banking sector 0:07:39.820 --> 0:07:44.090 in 2020 very draconian de leveraging policies for the real 0:07:44.090 --> 0:07:48.030 estate sector was implemented. The so called three red lines 0:07:48.040 --> 0:07:52.160 that curtailed property developers ability to borrow 0:07:52.175 --> 0:07:56.795 even more money from the banks to finance the next project. 0:07:56.805 --> 0:08:00.635 Suddenly the whole bubble began to deflate very rapidly and 0:08:00.635 --> 0:08:04.995 real estate investment was still down sort of 2030% compared 0:08:04.995 --> 0:08:08.585 to last year. And that is a major headwind to 0:08:08.595 --> 0:08:12.315 the economy. I think they're trying to turn that part around, 0:08:12.325 --> 0:08:15.255 even if they don't turn around zero covid, they are 0:08:15.255 --> 0:08:19.475 definitely turning around the de leveraging policy for the real 0:08:19.475 --> 0:08:20.495 estate sector. 0:08:21.540 --> 0:08:24.530 So this is what we can expect from China's 20th 0:08:24.530 --> 0:08:29.330 National Congress, the election of the most important officials, President 0:08:29.330 --> 0:08:32.930 Xi Jinping appears all set for an unprecedented third term 0:08:32.929 --> 0:08:37.420 in power. But who else is staying and who's leaving? Secondly, 0:08:37.420 --> 0:08:40.439 the meeting sets China's agenda for the next five years. 0:08:40.450 --> 0:08:44.210 So will those stringent zero covid policies continue, 0:08:45.050 --> 0:08:48.360 analysts are also looking for changes in the constitution and 0:08:48.360 --> 0:08:51.780 any signals that the common prosperity policy as well as 0:08:51.780 --> 0:08:55.179 government intervention, are going to be key for China's new 0:08:55.179 --> 0:08:58.380 emerging growth model. Now, that's in the face of longer 0:08:58.380 --> 0:09:02.940 term challenges the so called three D's debt, demographics and 0:09:02.940 --> 0:09:04.210 de globalization. 0:09:04.620 --> 0:09:07.689 So victor tell us, what do all these headwinds mean 0:09:07.690 --> 0:09:11.090 for China's economic growth target is at all feasible this 0:09:11.090 --> 0:09:11.880 time around 0:09:11.890 --> 0:09:15.240 In the short term. I think that the central government 0:09:15.240 --> 0:09:18.250 is gonna unleash a whole series of measures to try 0:09:18.250 --> 0:09:21.100 to convince the world at least that it has reached 0:09:21.100 --> 0:09:25.980 its growth target for 2022. Most independent analysts will say 0:09:25.980 --> 0:09:29.570 that there's no way China can reach this 5.5% growth 0:09:29.570 --> 0:09:29.900 rate 0:09:29.917 --> 0:09:32.156 By the end of this year. But I think we 0:09:32.157 --> 0:09:35.016 will see maybe a little bit more of this additional 0:09:35.017 --> 0:09:38.997 stimulus after the party. Congress which plausibly can give them 0:09:38.997 --> 0:09:42.186 some excuse to say no. Actually we still came very close, 0:09:42.187 --> 0:09:46.317 you know, 5% growth, something like that, potentially the leadership 0:09:46.317 --> 0:09:50.727 change is going to introduce new leaders, a new premier 0:09:50.727 --> 0:09:54.617 of China, a new executive, vice premier of China who 0:09:54.617 --> 0:09:55.199 maybe 0:09:55.214 --> 0:10:02.294 A lot more friendly to dovish monetary policy, less prudential 0:10:02.294 --> 0:10:06.054 regulations over the real estate sector. This in the short 0:10:06.054 --> 0:10:09.854 term will be bullish for growth. But as an economy 0:10:09.854 --> 0:10:13.934 that already is saddled with 300% of GDP worth of debt, 0:10:13.944 --> 0:10:16.974 any short term stimulus is going to result in higher 0:10:16.974 --> 0:10:20.144 debt level down the road. And again, the big 0:10:20.660 --> 0:10:23.981 is that we now live in a high interest environment. 0:10:23.991 --> 0:10:27.160 The interest payment could be quite onerous for all the 0:10:27.160 --> 0:10:32.040 different entities in china. It will be quite challenging for growth, 0:10:32.051 --> 0:10:34.681 maybe not in the next three or four months, but 0:10:34.691 --> 0:10:37.151 a lot of these growth concern will come back. So 0:10:37.151 --> 0:10:39.731 if there's a mini stimulus the next three or four months, 0:10:39.741 --> 0:10:42.691 that's great. But then a year later there's still going 0:10:42.691 --> 0:10:45.800 to be these growth concerns because of high debt 0:10:46.030 --> 0:10:49.230 chinese leaders have talked about common prosperity as a key 0:10:49.230 --> 0:10:52.170 strategic goal, Do you expect it to change the way 0:10:52.170 --> 0:10:53.170 china is run 0:10:54.010 --> 0:10:58.800 common prosperity is clearly very important and at the forefront 0:10:58.800 --> 0:11:02.610 of Xi's mind and the emerging ideology that will be 0:11:02.610 --> 0:11:05.610 confirmed at the party congress, but it's not very well 0:11:05.610 --> 0:11:10.300 defined at all. It's still very nebulous uncertain concept to 0:11:10.300 --> 0:11:13.189 sort of try and characterize it very, very simply, it 0:11:13.190 --> 0:11:17.929 is a focus on slower, more sustainable, more equitable growth 0:11:17.940 --> 0:11:21.750 with a much greater role for the state in the economy. 0:11:22.260 --> 0:11:26.439 So this could mean some quite positive structural reforms around 0:11:26.440 --> 0:11:30.590 the chinese welfare system. Labor mobility. On the flip side, 0:11:30.600 --> 0:11:34.040 it will see more of the regulatory crackdown that we 0:11:34.040 --> 0:11:37.080 have seen in the past, where areas that are unaligned 0:11:37.080 --> 0:11:41.229 with the common prosperity agenda like property sector, big rent 0:11:41.230 --> 0:11:44.930 seeking tech companies will be hit very hard from from 0:11:44.929 --> 0:11:45.679 the state. 0:11:45.950 --> 0:11:49.500 So it's slower, more sustainable growth, trying to boost the 0:11:49.500 --> 0:11:53.630 middle class, trying to boost incomes and shift away from 0:11:53.640 --> 0:11:57.840 this kind of debt-driven property model that has dominated China 0:11:57.850 --> 0:11:59.870 the past 5 to 10 years. 0:12:00.280 --> 0:12:05.510 Yeah, potentially it can be formalized and common prosperity, the 0:12:05.510 --> 0:12:09.470 manifestation of it has been kind of forced taxation from 0:12:09.470 --> 0:12:13.060 the billionaires, but the problem with common prosperity is that 0:12:13.059 --> 0:12:16.510 it's really not redistribution, right? So the money that has 0:12:16.510 --> 0:12:19.730 been donated by billionaires by and large has gone to 0:12:19.730 --> 0:12:22.560 the chinese government and chinese government by and large has 0:12:22.559 --> 0:12:26.810 not redistributed to actually poor households, there was kind of 0:12:26.809 --> 0:12:30.070 an anti poverty drive a few years ago which read 0:12:30.082 --> 0:12:34.042 just read some resources to poor households in rural areas, 0:12:34.052 --> 0:12:37.432 but the common prosperity mainly just resulted in more money 0:12:37.432 --> 0:12:42.011 going to the chinese government coffer. So that doesn't stimulate 0:12:42.011 --> 0:12:45.691 demand too much at the household level. What china needs 0:12:45.692 --> 0:12:48.612 actually is, if it's going to get into more debt, 0:12:48.622 --> 0:12:52.072 it has to be a demand side kind of stimulus program. 0:12:52.082 --> 0:12:54.802 China is the second largest economy of the world, but 0:12:54.802 --> 0:12:57.782 it can afford to give hundreds of dollars to ordinary people, 0:12:57.792 --> 0:12:59.872 really stimulate demand and 0:12:59.884 --> 0:13:02.654 that will be quite a boost to the economy and 0:13:02.654 --> 0:13:05.344 we'll get some of these troubled sectors like the service 0:13:05.344 --> 0:13:09.874 sector going again. But despite a lot of discussion among 0:13:09.874 --> 0:13:13.294 the experts in china on this kind of policy, the 0:13:13.294 --> 0:13:18.624 government continues to reject a demand side. Stimulus instead prefers 0:13:18.624 --> 0:13:23.714 a supply size stimulus, more infrastructure, more subsidies to the 0:13:23.714 --> 0:13:28.194 tech sector. But then that ends up exporting deflation the 0:13:28.194 --> 0:13:29.583 rest of the world, which 0:13:29.686 --> 0:13:31.836 of course the world needs it. We live in high 0:13:31.836 --> 0:13:35.695 inflation era, we do need a deflation from china. But 0:13:35.696 --> 0:13:38.805 in the medium term, that really doesn't help the world economy, 0:13:38.816 --> 0:13:41.776 how the world can benefit even more from china is 0:13:41.785 --> 0:13:46.045 if the 1.3 billion chinese consumers can become wealthy and 0:13:46.046 --> 0:13:50.026 prosperous and they can spend on goods and services produced 0:13:50.035 --> 0:13:52.736 in the rest of the world, we haven't seen hardly 0:13:52.736 --> 0:13:56.126 any of it because of the covid lockdown and because 0:13:56.136 --> 0:13:59.476 wages have not grown very much in china, 0:13:59.710 --> 0:14:03.040 I think she didn't think actually recognizes that these are 0:14:03.050 --> 0:14:06.720 really big problems for china and this is why in 0:14:06.720 --> 0:14:10.380 some respects we're getting this common prosperity policy coming through? 0:14:10.410 --> 0:14:12.790 I think she didn't think knows that the growth model 0:14:12.790 --> 0:14:16.679 has to change cannot keep relying on debt and exports 0:14:16.679 --> 0:14:19.790 to a lesser degree to drive growth. He has realized 0:14:19.790 --> 0:14:21.580 that some of the external depend 0:14:21.820 --> 0:14:24.340 is that china has and this is why we have 0:14:24.340 --> 0:14:27.400 the dual circulation policy and a shift to rely more 0:14:27.400 --> 0:14:32.120 on china internally. The realization that de globalization and certainly 0:14:32.120 --> 0:14:35.720 demographics as well, that is a big part of common prosperity, 0:14:35.720 --> 0:14:37.990 so boosting the growth rate so that there is a 0:14:37.990 --> 0:14:42.190 realization among the top leadership that china faces these very 0:14:42.190 --> 0:14:43.510 difficult headwinds. 0:14:43.810 --> 0:14:46.960 And I think common prosperity is an attempt to shift 0:14:46.960 --> 0:14:50.290 the political economic model to shift the growth model and 0:14:50.290 --> 0:14:54.310 also to change the source of the party's legitimacy for 0:14:54.310 --> 0:14:58.160 rule for governance. You can no longer rely on high growth, 0:14:58.170 --> 0:15:02.350 high debt, rising property prices. The model there also has 0:15:02.350 --> 0:15:05.100 to change that china is going to be slower, more 0:15:05.100 --> 0:15:07.830 vulnerable to certain areas. So there needs to be a 0:15:07.830 --> 0:15:11.130 shift both in the growth model but also where the 0:15:11.130 --> 0:15:11.620 party too. 0:15:11.985 --> 0:15:15.795 Its legitimacy for rule. Common prosperity is an attempt to 0:15:15.795 --> 0:15:18.195 do both of these things changed a bit the growth 0:15:18.195 --> 0:15:22.325 model and change the source of part legitimacy as well. 0:15:22.365 --> 0:15:24.895 There will be clues at the party congress of how 0:15:24.895 --> 0:15:27.885 they're going to attempt to do this very difficult task. 0:15:27.895 --> 0:15:30.915 But they are aware of the challenges. The rise of 0:15:30.915 --> 0:15:34.295 china has been this big story of the past few decades. 0:15:34.305 --> 0:15:36.325 What does it mean now if you're starting a new 0:15:36.325 --> 0:15:39.555 chapter where slower growth is going to be the new normal, 0:15:39.930 --> 0:15:44.200 the Congress party understands that growth naturally slows down as 0:15:44.200 --> 0:15:48.430 an economy gets wealthier and wealthier. But for Xi Jinping 0:15:48.440 --> 0:15:52.310 he needs growth to be at a certain pace because 0:15:52.310 --> 0:15:55.120 the ultimate objective is to catch up with the United 0:15:55.120 --> 0:15:58.650 States in terms of nominal GDP, which of course most 0:15:58.650 --> 0:16:01.820 economists will tell you is kind of meaningless. Nonetheless, I 0:16:01.820 --> 0:16:04.420 think for china this would be a very important milestone. 0:16:04.420 --> 0:16:06.430 The leadership has talked about this 0:16:06.608 --> 0:16:09.538 since the 19 fifties. It's like the great leap forward 0:16:09.548 --> 0:16:15.118 in 1958 1959 was all about surpassing Britain and also 0:16:15.118 --> 0:16:18.228 catching up with the United States and this has been 0:16:18.228 --> 0:16:22.278 the policy objective of generations and generations of chinese leadership. 0:16:22.288 --> 0:16:24.358 And for Xi Jinping this is no different. So this 0:16:24.358 --> 0:16:29.048 is why I think by statistical manipulation china will have 0:16:29.048 --> 0:16:32.888 a decent growth rate officially this year actually for almost 0:16:32.888 --> 0:16:33.270 for certain 0:16:33.286 --> 0:16:35.506 Only the US is going to pull ahead, China is 0:16:35.506 --> 0:16:37.896 going to fall behind a little bit. But for the 0:16:37.896 --> 0:16:40.800 next few years as China seeks to catch up with 0:16:40.800 --> 0:16:43.400 the United States in the next 10 years or so. 0:16:43.410 --> 0:16:46.890 It has to maintain GDP growth. I think the numbers 0:16:46.900 --> 0:16:50.780 at least 3.5% to have a hope of catching up 0:16:50.780 --> 0:16:54.380 with the US despite all of these headwinds, the technocrats 0:16:54.380 --> 0:16:57.490 have to come up with some way to achieve this growth. 0:16:57.510 --> 0:16:59.950 We do normally in a couple of 0:16:59.960 --> 0:17:03.270 areas and new normal in terms of the growth rate 0:17:03.320 --> 0:17:05.810 is going to be slower due to the three Ds. 0:17:05.810 --> 0:17:10.199 I talked about debt, demographics, de globalization that is structural. 0:17:10.200 --> 0:17:13.360 There will be periods of high growth around that cyclically 0:17:13.450 --> 0:17:17.240 but longer term china is slowing. The second factor, which 0:17:17.250 --> 0:17:21.159 I think people are already adjusting quite quickly and partly 0:17:21.170 --> 0:17:25.150 thanks to Washington, what was led by trump but has 0:17:25.150 --> 0:17:26.629 been taken up by both 0:17:26.640 --> 0:17:31.119 sides of politics in the US is a more assertive 0:17:31.119 --> 0:17:35.750 china and china that is looking to not cut ties 0:17:35.750 --> 0:17:37.800 with the rest of the world as such, but to 0:17:37.810 --> 0:17:43.640 insulate the economy, the political system from outside levers of 0:17:43.640 --> 0:17:47.470 control and this is across finance, across tech across commodity 0:17:47.470 --> 0:17:51.109 supply chains. So china would very much like to trade 0:17:51.119 --> 0:17:53.310 more with the rest of the world, wants to export more. 0:17:53.320 --> 0:17:56.810 But in terms of the imports and particularly around key 0:17:56.810 --> 0:17:59.920 choke points, there's a very strong push to to try 0:17:59.920 --> 0:18:03.570 and cut dependence with the rest of the world. That 0:18:03.570 --> 0:18:07.990 does seem to be making headway across c suites around 0:18:07.990 --> 0:18:12.139 the globe and in key capitals, that trend is just 0:18:12.140 --> 0:18:16.920 getting started to be a long rumbling grind. People adjusting 0:18:16.930 --> 0:18:19.740 to a newer model in china and a new model 0:18:19.740 --> 0:18:19.939 in the 0:18:20.090 --> 0:18:23.010 The world as well as globalization comes out of favor 0:18:23.020 --> 0:18:26.100 to a certain degree. All of this isn't just important 0:18:26.109 --> 0:18:28.340 inside China, it's going to have an impact on the 0:18:28.340 --> 0:18:30.830 rest of Asia and the world. Do you think it 0:18:30.830 --> 0:18:34.400 will change the way investors and businesses look at China? 0:18:34.410 --> 0:18:38.669 That's a bit harder to gauge. China initially was the 0:18:38.680 --> 0:18:44.440 clear winner from the pandemic from 2020 until probably October 0:18:44.450 --> 0:18:46.670 November last year. China was boo 0:18:46.990 --> 0:18:51.290 exports booming money flowing into its bond market flowing into 0:18:51.290 --> 0:18:55.350 the equity market from foreigners. But now it shifted and 0:18:55.359 --> 0:18:58.150 in line with some of the common prosperity and then 0:18:58.150 --> 0:19:01.429 the tech regulatory crackdown, there has been a change in 0:19:01.430 --> 0:19:05.669 view on china and investors are certainly wary of putting 0:19:05.670 --> 0:19:09.560 their money into china, both chinese financial assets and sort 0:19:09.560 --> 0:19:12.850 of longer term fixed asset investment F. D. I. I 0:19:12.850 --> 0:19:13.340 do think 0:19:13.350 --> 0:19:16.930 The flows into China will return after growth picks up 0:19:16.940 --> 0:19:21.710 in COVID-19 fade away. But the caution that investors have 0:19:21.720 --> 0:19:26.180 gained around the tech crackdown around geopolitics of Ukraine and 0:19:26.180 --> 0:19:30.480 Taiwan and the more clearly authoritarian model that that is 0:19:30.490 --> 0:19:33.680 becoming evident will remain so the flows will come back 0:19:33.690 --> 0:19:36.979 but there will be caution and probably the level the 0:19:36.980 --> 0:19:39.150 pace of inflows will be less than we've seen in 0:19:39.160 --> 0:19:40.040 the past. 0:19:40.750 --> 0:19:44.119 So what will china due to meet its 5.5% growth 0:19:44.119 --> 0:19:47.860 target for the year. World zero Covid policies continue. And 0:19:47.859 --> 0:19:51.220 how will china deal with longer term challenges, so called 0:19:51.230 --> 0:19:55.619 three days of debt, demographics and de globalization. All eyes 0:19:55.630 --> 0:19:59.350 on these possible inflection points. As china's top leaders meet 0:19:59.350 --> 0:20:01.920 for their milestone National Congress. 0:20:02.390 --> 0:20:05.189 We'll be looking for more clarity on the common prosperity 0:20:05.190 --> 0:20:09.530 policy and how this will change the economic direction of china. 0:20:09.540 --> 0:20:12.760 It's likely to mean slower but also most sustainable and 0:20:12.770 --> 0:20:14.050 equitable growth. 0:20:14.780 --> 0:20:17.480 Now, how it's achieved will be closely linked to the 0:20:17.480 --> 0:20:22.359 political legitimacy of the chinese Communist Party presidency appears all 0:20:22.359 --> 0:20:25.630 set for an unprecedented third term in power. But who 0:20:25.630 --> 0:20:27.470 else is staying and who's leaving? 0:20:28.369 --> 0:20:31.370 That's five things to look out for at china's 20th 0:20:31.380 --> 0:20:35.340 National Congress. Thanks to my guests victor shih, associate professor 0:20:35.350 --> 0:20:39.210 of political science at the University of California san Diego 0:20:39.220 --> 0:20:42.740 and Rory Green head of china and asia research at T. S. 0:20:42.740 --> 0:20:46.340 Lombard money Mind as every saturday at 10 30 PM 0:20:46.350 --> 0:20:49.570 on mediacorp C N A. Can also catch us online 0:20:49.580 --> 0:20:52.190 at CNN dot asia and on youtube.